Piramal Fund invests in Lotus Greens’ Noida residential project

BY  Swet Sarika, VCCircle

Piramal’s realty investment unit plans to invest as much as $1 billion towards real estate this fiscal.

Piramal Fund Management, the real estate investment arm of Piramal Group, has invested in a residential project by north-based developer Lotus Greens, two people familiar with the development told VCCircle. The investment has been made in the form of structured debt.

VCCircle could not immediately ascertain the size of the investment but it could be in the same range as its other recent deals.

Piramal recently sealed a deal with Satya Group for a Gurgaon project, where it invested Rs 100 crore. In the first deal from its separate alliance with Canada Pension Plan Investment Board (CPPIB), it invested Rs 110 crore in a luxury residential project of Advance India Projects Ltd in Gurgaon.

The latest investment has been made in a project called Lotus Greens Arena located at sector 79, Noida. This luxury residential project is spread across 10 acres and offers 3 & 4 BHK apartments ranging from 1,495 sq. ft. to 2,395 sq. ft. The project forms a part of developer’s township Sports City.

“The deal was closed recently,” said a source quoted above.

Emails written to Khushru Jijina, managing director, Piramal Fund Management and P Sahel, vice chairman, Lotus Greens, did not elicit any response till the time of filing this story.

Lotus Greens is present across residential, commercial, hospitality, education and healthcare verticals. Founded by Nirmal Singh and led by its vice chairman P Sahel, the company has ongoing projects in Noida and Gurgaon.

As for Piramal, it plans to invest as much as $1 billion towards real estate this fiscal. In the last four months, it has invested Rs 2,000 crore on behalf of proprietary debt book and funds business. In a recent interaction with VCCircle, JIjina said he will be approving between Rs 600-800 crore of transactions every month through the rest of the year.

Indian realty industry to almost double to $140B by FY17

BY  Pooja Sarkar, VCCircle

The industry, which had been growing at around 8 per cent annually during 2009-11, saws a 6.5 per cent deceleration in 2012-13.

The Indian real estate industry is expected to grow to approximately $140 billion by FY17, said a research report on real estate released by advisory firm Ernst $ Young and industry body FICCI. The report said, according to industry estimates, the size of the Indian real estate market was close to $78.5 billion in FY13.

Niranjan Hiranandani, chairman of FICCI’s real estate committee and managing director, Hiranandani Constructions Pvt. Ltd, said, “Mumbai urgently needs change of infrastructure with the support of government and also reforms in taxation, with 34 per cent of cost of an affordable house going out as taxes.”

The realty industry, which had been growing at around 8 per cent during 2009-11, saw a 6.5 per cent deceleration in 2012-13 primarily due to the sluggish domestic growth, rising input costs and negative global economic sentiments.

The sector’s major growth driver has been the pumping of capital through foreign direct investment (FDI) route. Between April 2011and July 2013, the sector attracted FDI of close to Rs 100,000 crore. The report, however, said the volume of FDI into the sector has been declining.

Even for private equity funding, the sector saw its peak in 2007 when $6.8 billion came in. In 2012, the industry attracted $1.7 billion from limited partners in realty projects across the country, as per the report.

For the first half of the current calendar year, the realty industry has seen investment of close to $1.4 billion and industry experts indicate that this year would be one of the better years compared to last four years.

With negligible sales and developers’ reluctance to bring down prices of properties, even banks’ credit exposure to the real estate and housing sector declined from 10 per cent as a percentage of gross bank credit in FY10 to 7.9 per cent in FY13. While bank construction finance continues to be the cheapest source of funding, another instrument which has caught attention of developers is raising money through non-convertible debentures (NCDs). Reflecting this trend, NCDs worth $4.2 billion were issued in 2012 compared with $3.8 billion in 2011.

The realty industry recently witnessed a few big-ticked buyout transactions in commercial office space by private equity funds. Over the last three years, it has attracted investment of $1.14 billion in commercial office space portfolio development.

(Edited by Joby Puthuparampil Johnson)

ArthVeda Scripting Seven Real Estate & Infra Funds, Eyes $2B AUM

Ropes in Lokanathan Nadar from Wadhawan Group to lead the infrastructure vertical.

ArthVeda  Fund Management has set the process rolling for four private equity funds in the real estate and infrastructure domain and is eyeing a total of seven funds with assets under management of around $2 billion by 2015, a top company executive told VCCircle.

ArthVeda  is a fund management company backed by private housing finance firm Dewan Housing Finance Ltd.

The plan appears bullish given the current fund raising climate. However, expectations of softening interest rates could help boost demand for residential housing. Even as overall economic slowdown has cast a doubt on prospects for commercial and retail property, the fund house could be betting on a bounce back in demand with interest rates peaking out.

Out of the seven funds in the planning stage, five is already on the table. These include two separate funds focused on low income housing projects besides a middle income housing fund , an asset class agnostic offshore fund besides an infrastructure fund.

Bikram Sen, chief executive officer of ArthVeda said, “In the next three years we will have asset under management of Rs 10,000 crore.”

The firm is in the final stages of planning to launch the two funds targeted at low income group housing projects. The first of these funds will be launched next month with a targeted corpus of Rs 250 crore. The fund will be raised in collaboration with Aadhar Housing Finance Ltd, the low income housing finance arm of Dewan Housing Finance. Aadhar was formed in partnership with IFC, the private investment arm of the World Bank, in February last year. The first fund will stay invested for a short term period of three years.

The second fund focused on low income housing will be a long term fund with a target size of Rs 500-750 crore. The fund raising for the second fund will happen in 2012-13.

Next month ArthVeda is also planning to launch a small offshore fund which will be open for investment in every asset class of realty sector, said Sen.

This comes after it recently launched a Rs 300 crore real estate fund, called ArthVeda Star Fund including a green shoe option of Rs 100 crore. The fund is focused towards green field projects in the middle income housing segment.

Sen said, “Around 75 per cent of the corpus of ArthVeda Star Fund will be invested in tier II and III cities and in suburbs of metros and for the rest we have flexibility but it will be dedicated to middle income housing projects only.”

He added, this fund will invest Rs 5 crore-25 crore in each project and around 34 investments will be made from this fund.  It will invest from the early stage as it is a purely greenfield focused fund and will exit the projects in three years or maximum four years.

According to Sen, ArthVeda Star Fund will manage to raise Rs 100-140 crore by the end of this month and it expects a final closure by March-April this year. Around 40 per cent of the fund’s capital is expected to come from institutions, banks, insurance trusts and rest from high net worth individuals. DHFL, the parent company will come in as an anchor investor. The fund is aiming at a gross return before expenses of more than 30 per cent.

Leveraging its parent, DHFL’s housing finance clientele in these markets, the fund has earmarked 16 cities across the country for its investments. It has already vetted and signed Memorandum of Understanding (MoU) for close to 16 projects. DHFL is tying up with a bank to provide construction finance to the developer where ArthaVeda Star Fund will invest.

Lokanathan Nadar To Head Infrastructure Vertical:

The fund house has also announced today the appointment of Lokanathan Nadar to lead the infrastructure vertical.

Nadar joins ArthVeda from Wadhawan Group, where he was CEO - Infrastructure & SEZ, where he was heading both the development of Pavana Multi Product SEZ and other Infrastructure initiatives of the group. He comes with almost 15 years of experience in the core infrastructure sector in the areas of project development & construction, conceptualization, business development, marketing and identification of new business opportunities.

“ArthVeda’s growth strategy is built around a number of verticals; we are already managing funds in the real estate vertical. With Mr Nadar joining the management of ArthVeda the company is opening up its infrastructure vertical. His wide and all round experience and in-depth knowledge of the core infrastructure sector will help us launch a series of specialized infrastructure funds,” said Bikram Sen.

Before Wadhawan Group, Nadar has worked with Sterling SEZ & Infrastructure Ltd as COO and prior to that he worked with IL&FS. Source: VCCircle

Kotak Realty Fund Invests $16M In Orris' Gurgaon Residential Project

The transaction involved issue of optionally convertible cumulative preference shares to Kotak Realty Fund.

Kotak Realty Fund has invested Rs 80 crore($16.3 million) in  Orris Infrastructure’s group housing project in Gurgaon(Haryana), a top company executive told VCCircle. The latest deal adds to the list of such residential projects in the northern belt of the country to have attracted interest from private equity funds.

A senior executive of Kotal Realty Fund privy to the deal said the investment is for the project called Orris Carnation, which is already under implementation at sector-85 in Gurgaon. “We have invested from our domestic real estate fund,” he said.

The group housing project is spread across 29 acres with a near completed residential apartment called Orris Carnation Residency. The transaction involved issue of optionally convertible cumulative preference shares or OCCPS to the realty fund.

International property consultancy Cushman and Wakefield advised Orris Infrastructure whereas Kotak Realty Fund managed the deal on its own.

Orris Infrastructure is a Gurgaon-based realty company which is owned by Vijay Gupta and apart from real estate it has interests in energy, hospitality and education.

The group has also formed a joint venture with the country’s largest property developer by market value, DLF Ltd called DLF-Orris where it will develop a 50 acre land parcel in Sector 88, Gurgaon for a commercial office space.  According to the company, it has a land bank of 1,000 acres with an estimated valuation of Rs 2,500 crore.

Kotak Realty Fund at present has assets under management of $850 million and it has fully deployed its first fund of $100 million called Kotak India Real Estate Fund I.  It has recently raised a domestic fund of Rs 523 crore.

In another deal in the same space, Sun-Apollo Real Estate Fund invested Rs 75 crore to acquire 50  per cent stake in Assotech Ltd’s group housing project spread across 12 acres in Sector -99 in Gurgaon. Few months back, India Property Fund had picked up 49 per cent stake in Ramprastha Group's housing project Skyz in sector 37D in Gurgaon for Rs 120 crore.

These PE deals comes at a time when bank funding has become costlier for developers but residential segment of real estate looks attractive for investment as the rate of interest is now peaking out. Given high suppressed demand for residential units in the Delhi NCR area, investors are betting on uptick in consumer demand for housing as housing loan rates starts retreating from current highs.

Besides these small and mid-size PE deals, the real estate sector has also seen a few large size transactions in the past one year including Ascendas India Trust acquiring a portfolio of five buildings in Phoenix Infocity Pvt Ltd’s SEZ for Rs 855 crore. Kotak Realty Fund sold Peepul Tree Properties (an IT park in Goregaon) to Tata Realty and Infrastructure Ltd and Tata Realty Initiatives Fund 1 for Rs 525 crore. Blackstone invested around Rs 875 crore to buy 37 per cent stake in Manyata Promoters Pvt Ltd and more recently the PE giant also struck another large deal where it acquired Pune SEZ of DLF and Hubtown for Rs 810 crore. Source: VCCircle